Power now drives markets Axel Merk warns post-WWII era is over

As silver prices breached the historic $80 an ounce mark and copper tested $6 per pound Tuesday, Merk warned that the surge in commodities is not merely a monetary phenomenon but a symptom of a deeper geopolitical fracture.

In an interview with Kitco News recorded on Jan. 6, 2026, Merk argued that the traditional signals investors have relied on - yield curves and P/E ratios - are failing because the underlying driver of capital has shifted.

“Power now drives markets,” Merk said. “We are no longer in a world where efficiency drives capital. The era where you could rely on the free flow of goods and the sanctity of global supply chains is over.”

The Decoupling of Signals

The sharp rise in precious metals comes as central banks continue to diversify reserves away from sovereign debt, a trend Merk identified as a rational response to fiscal dominance.

The data supports this shift: The U.S. federal deficit totaled $1.8 trillion for Fiscal Year 2025, pushing debt held by the public to 99.8% of GDP. More critically, net interest payments on the national debt officially surpassed $1 trillion for the first time in history in 2025, creating a mathematical feedback loop that forces the Treasury to issue more debt just to service old obligations.

Meanwhile, global central banks have extended their gold buying streak. Following a record 1,045 tonnes purchased in 2024, official sector demand remained robust through late 2025, with major additions from Poland, India, and Turkey. This sustained buying has established a floor for metal prices independent of real interest rates, validating Merk's view that official institutions are prioritizing "monetary neutrality."

“The market is trying to price in a reality where the U.S. Treasury and the Federal Reserve are effectively the same entity,” Merk said.

Outlook 2026
The Mining Stock "Trap"

Despite gold finishing 2025 up 67% - its strongest performance since 1979 - Merk issued a contrarian warning regarding the mining sector. While conventional wisdom suggests mining equities should leverage the price of the underlying metal, Merk pointed to rising jurisdictional risks and government intervention as headwinds.

Merk warned that the speculative trade in mining stocks “might not end well.”

Data supports this caution. Bank of America projects that global gold production from major North American miners will actually decline by 2% in 2026, while All-In Sustaining Costs (AISC) are forecast to rise to $1,600 per ounce. Furthermore, the "state activism" Merk warns of is materializing: Mexico recently implemented major mining reforms, and Mali moved to enforce stricter state control over gold production, threatening the margins of foreign operators.

“Investors look at silver at $80 and assume mining stocks must follow,” Merk said. “That is a dangerous assumption in this new environment.”

Geopolitics and Scarcity

Addressing the copper market, which is trading near record highs, Merk noted that the price reflects a physical scarcity exacerbated by the rewiring of global alliances.

“This isn’t a bubble,” Merk said. “You cannot print copper. If the supply chains are broken by geopolitical friction, the price has no ceiling.”

Recent market data corroborates this scarcity. Analysts estimate a refined copper deficit of over 300,000 tons in 2026. This shortfall is compounded by geopolitical instability in resource-rich nations like Venezuela - where the recent capture of former President Nicolás Maduro has reignited safe-haven demand and disrupted potential supply recovery.

Merk concluded that while the shift to this new paradigm is volatile, it offers clarity for those willing to abandon the old playbooks and recognize that access to physical resources now outweighs paper derivatives.

“The danger isn’t the volatility,” Merk said. “The danger is clinging to a post-WWII framework that simply doesn’t exist anymore.”